Assume that a nation initially has an output level of 150 units per period and that consumption is also 150 (there is no investment or government spending). Suppose there is a temporary (i.e. one-period) increase in GDP of 16% in period 0. Assume the country has access to global financial markets with an interest rate of 8%. Assume an infinite time horizon for all questions. What is the present value of GDP for this country? What is net factor income from abroad in the period of the shock and for the periods after the shock?

Answer rating: 100% (QA)

solution a since the time period is infinite the annual gdp fro... View the full answer